PERSONAL STATEMENTS BY
THE MONETARY POLICY COMMITTEE MEMBERS
MPC MEETING FEBRUARY 26 -27TH 2024

1. AKU PAULINE ODINKEMELU
I voted to raise the Monetary Policy Rate (MPR) by 300 basis points from 18.75
percent to 21.75 percent, the Cash Reserve Ratio (CRR) by 750 basis points
from 32.50 percent to 40.00 percent, adjust the asymmetric corridor around
the MPR to +100/-700 from +100/-300 basis points, and retain the Liquidity
Ratio (LR) at 30.00 percent. My position is predicated on the persistent
inflationary pressures, depreciation of the exchange rate due to demand
pressure amid persistent supply shortages, and the need to effectively anchor
expectation. In my view, this stance will contain inflationary pressures in the
short to medium term.
My decision is influenced by the following developments:

Global Developments

Global output growth is projected to remain stable at 3.1 percent in 2024,
relative to the previous year, and may improve to 3.2 percent in 2025, owing
to the resilience of the United States economy, leading emerging markets,
and developing economies, as well as the fiscal stimulus in China. However,
risks to stable global output growth include conflicts in the Middle East (Israel
and Gaza), Europe (Russia and Ukraine), with the likelihood of escalation to
other regions. Additionally, climate change issues such as floods and
droughts pose further challenges.
Inflation is moderating in many regions of the globe, signaling early
indications of a disinflationary process amid tight monetary policy stances.
Global inflation is projected to slow to 5.8 percent by the end of year 2024
and decelerate further to 4.4 percent in 2025. On the downside, new
episodes of commodity price spikes resulting from geopolitical shocks,
including the Israel-Gaza conflict, continued attacks in the Red Sea, Iran and
US tensions, and supply chain disruptions, could prolong tight monetary
conditions in many regions across the globe. The decision of most central
banks to retain the policy rate despite declining inflation in advanced
economies is in line with the expectation.

Although global inflation is projected to moderate in 2024, inflation remain
above the central banks targets, prompting continued tight financial
conditions in the Advanced Economies. Consequently, Emerging Markets

and Developing Economies may continue to experience capital outflow. The
risks may significantly impact the Nigerian domestic economy as tight
financial condition in advanced economies may continue to exert pressure
on the exchange rate through capital outflow. To mitigate the risks, I vote for
tightening, while emphasising the need for effective coordination between
the fiscal and monetary authorities to synchronize policy response and restore
macroeconomic stability.
Domestic Economic Developments
Nigerian economy remains resilient. Real GDP grew by 3.46 percent in the last
quarter of 2023 (year-on-year), from 2.54 percent in the third quarter of 2023.
The non-oil sector which grew by 3.07 percent in real terms in the last quarter
of 2023, (higher by 0.32 percentage point relative to third quarter of 2023),
and the oil sector which grew by 12.11 percent (compared with 2.22 percent
contraction in the third quarter 2023), are the joint drivers of output growth.
Output growth remained fragile as Composite PMI decreased to 48.5 points
in January 2024 from 49.1 points in December 2023, remaining below the
expansion threshold of 50 index points, following low business activities.
In spite of output growth, inflationary pressures continued to persist, prices
remained sticky as headline inflation rose further to 29.90 percent in January
2024, from 28.92 percent in December 2023 due mainly to the removal of PMS
subsidy, the adoption of a market-based exchange rate regime, and
persistent security challenges. The month-on-month rise of core inflation
(Headline inflation less farm produce and energy) to 2.24 percent from 1.82
percent in the preceding month signals high exchange rate pass through
effect to domestic prices. This brings to the fore, the importance of
eliminating distortions in the foreign exchange market, promoting transparent
and efficient foreign exchange market and ultimately engender exchange
rate stability. The reforms embarked upon by the Bank in the foreign
exchange market are commendable and should be sustained. The major
challenge confronting the economy, however, is expanding the supply-side
of the foreign exchange market. I understand the constraints of the Bank in
this regard, while advocating for stronger coordination with fiscal authority on
audacious strategies to improve the supply of foreign exchange to the
market.
On the monetary sector, growth in money supply (M3) rose by 18.25 percent
to ₦93.72 trillion at end-January 2024 over preceding December. Broad
money (M2) and narrow money (M1) grew by 17.81 and 3.68 percent,
respectively at end-January 2024. The growth in broad money supply was
driven by the rise in other deposits, transferable deposits, and securities other
than shares. In my view, the growth in M1 could further worsen inflationary

pressures in the economy, as it signals rising transactionary motive or excess
liquidity in the system. The motive for holding excess liquidity is generally
classified into precautionary or voluntary motives. Precautionary excess
liquidity portion is useful as a buffer for insuring bank capital and uncertainty
surrounding customers’ withdrawal, and does not have negative effect on
monetary policy. However, involuntary motive usually above the desired level
– a common feature of developing economies banking system – is not
desirable during this period of persistent inflationary pressure, and also
influence my decision to vote for monetary policy tightening. In voting for
tightening, I am mindful of the implications of rate hike on the stability of the
banking system and therefore, will vote to raise the Monetary Policy Rate
(MPR) by 300 basis points from 18.75 percent to 21.75 percent.
The Nigerian financial system is resilient as the banking sector remains sound
and stable. Total assets of the banking industry increased month-on-month by
24.76 percent between December 2023 and January 2024.The banking
industry Capital Adequacy Ratio (CAR) remained above the minimum
threshold of 10–15 percent. Similarly, the Liquidity Ratio (LR) remains above
the regulatory threshold of 5 percent and 30 percent, respectively. The
industry NPL ratio of 4.15 per at end-January 2024, which is itching towards
the industry regulatory threshold of 5 percent should be monitored closely.
Given that most banks had CRR above the regulatory threshold of 32.50
percent and the industry average of 39.36% at end-January 2024, I vote to
raise CRR by 750 basis points. I am also aware that tightening of money
supply will lead to increased borrowing costs for businesses, with
consequences for both the bad debt portfolio of banks and the risks. I am,
however, confident that the Bank’ supervisory tools are robust to address risks
arising from monetary policy tightening.

2. ALOYSIUS UCHE ORDU
Global Economic Developments
Global growth is forecast at 3.1 percent in 2024, unchanged from 2023.
Though low by historical standards, this stability demonstrates resilience in the
global economy, in view of high interest rates and heightened geopolitical
tensions. A key driver of global growth is the resilience of the US economy
which
defied
recession
forecasts
and
attained
near-record
low
unemployment, rapid economic growth and fading inflation.
The US economic performance will offset the growth forecast for China, the
world’s second largest economy, which is facing weak domestic demand
and dimmer outlook for the real estate sector. Chinese authorities have set
an ambitious growth target of around 5 percent in 2024, essentially the same
as last year when the country struggled to emerge from three years of zeroCovid policies, and foreign direct investment hit a 30-year low.
In Europe, rising geopolitical tensions (Russian-Ukraine war) will continue to
weigh heavily on growth potential (GDP growth of 1.8 percent in 2024), thus
avoiding a recession. The global purchasing managers index for February
2024 remains unchanged with marked deterioration in the Eurozone
compensated by improving activity in other world regions.
The Israeli-Hamas war is further complicating the global geopolitical scene;
and the Houthi’s attacks on ships in the Red Sea is raising global shipping
costs and could result in a spike in oil prices – a downside risk to the global
economic outlook. The emerging economies of Asia will contribute
significantly to global growth in view of their export recovery and continued
investments in supply chains.
On inflation, with consumer prices trending downwards in advanced
countries, the US Federal Reserve, and the European Central Bank (ECB) will
likely end policy rate increases and commence lowering rates in the second
half of 2024.
For Africa, the confluence of global economic and political headwinds,
regional challenges, and climate risks will constrain some countries’ ability to
settle their international financial obligations. Nevertheless, Africa will be the
second fastest-growing region with 12 of the 20 fastest-growing economies in
2024 (according to the Economist Intelligence Unit). As in previous years, East
African countries—Ethiopia, Kenya, Uganda, Rwanda, Tanzania, and the
DRC—will record growth rates in the range of 5% to 6 percent, which is above
the 3.2 percent average for sub-Saharan Africa in 2024.

Unlike the situation in advanced countries, inflation remains a challenge and
many African central banks will continue to increase interest rates in view of
high inflation, currency depreciations, and heavy debt burdens. In March
2024, Egypt raised its interest rate by 600 basis point to 27.25 per cent as part
of a package of measures that included currency devaluation and to ease
foreign exchange shortages.
Kenya’s Monetary Policy Committee raised its rate to 13 percent, the highest
in 12 years, as inflation risks remain elevated and to stem pressures on the
exchange rate. The Bank of Uganda also raised its rate to 10 percent to curb
inflation and to support the shilling.
Earlier, an interest rate hike to 12.5 percent, and an increase in the reserve
ratio for local banks to 26 percent, combined to strengthen the Zambian
kwacha vis-à-vis the US dollar. The currency had previously dropped 21
percent against the US dollar during the period October 2023 to February
2024. And despite political pressure ahead of national elections in May, the
South African Reserve Bank insists that there will be no interest rate cut until
inflation is brought under control.
Nigeria: Economic Indicators and Outlook
Nigeria currently faces a challenging economic situation. CBN staff
presentations during the MPC meeting in February highlighted several of
these challenges. First, the economy grew by 2.7 percent in 2023 (a decline in
per capita terms), reflecting low growth across most sectors. The transport
and logistics sectors were particularly hit more directly on account of the
elimination of the decades-long fuel subsidy and the adoption of a marketbased exchange rate regime.
Second, there was a substantial and sustained increase in inflation rates: with
an increase in headline inflation to 29.9 percent, food inflation to 35.4
percent, and core inflation to 23.59 percent in January 2024. Food prices rose
sharply due to the higher fuel and transportation costs and increased
insecurity in food producing areas.
Third, business activities slowed as reflected in the decrease in the composite
purchasing managers’ index to 48.5 points in January 2024. The index
remained broadly below the expansion threshold of 50 index points
throughout the preceding 12 months. Unemployment, particularly youth
unemployment, increased during the period, adding to the burgeoning
population of people living in poverty.
Fourth, there was an exponential growth in broad money supply (M3) by
18.25 percent to Naira 93.72 trillion in January 2024 which combined with the
cost push factors indicated to exacerbate the surge in inflation.

Fifth, on fiscal policy, Nigeria’s tax-to-GDP ratio has stagnated at around 7
percent over time. This ratio is among the lowest in the world and falls far
short of the average for sub-Saharan Africa (16.5 percent), Asia-Pacific and
Latin America and the Caribbean (around 23 percent), and the OECD (over
33 percent). The ratio emphasizes the potential to raise both tax and non-tax
revenues vital to boost investment spending in infrastructure and human
capital development. Further, concerted efforts to boost revenues will
improve the fiscal space, especially in view of the recent spike in debt-torevenue ratio to 179 percent at the end of the third quarter of 2023.
Finally, in the external sector, the balance of payments deficit narrowed due
to the combined effects of reduced imports (exchange rate depreciation),
and increased exports of crude oil at favorable prices (US$85 per barrel).
The above list is by no means exhaustive but serve to illustrate some of the
constraints to better outcomes even though they are outside the immediate
remit of monetary policy.
To address the associated challenges would thus require a whole of
government approach to map out and to execute a program of economic
diversification and structural transformation. A robust revival of Nigeria’s
economy is needed simply to prevent the number of poor people from
increasing beyond the current 133 million multi-dimensionally poor in 2022
(National Bureau of Statistics). Based on the performance of comparable
lower middle-income countries, even an ambitious growth target of 6 to 7
percent throughout the next two and half decades would still leave millions
of poor people by 2050, when Nigeria will rank as the third most populous
country in the world. More troubling, if growth continues at around the
current 3 percent a year, the number in absolute poverty would likely double
by 2050.
On monetary policy, there was heightened expectation on the February
MPC meeting, especially as the current sustained price rise is wreaking havoc
on the living standards of people. It is imperative to break the cycle of
inflation as a prerequisite for sustained economic growth and to stabilize the
exchange rate, following the Naira’s sharp depreciation in recent months.
A substantial hike in interest rate at this time will moderate inflationary
pressures in the short- to medium-term. It will also send a strong signal to
investors (domestic and foreign) about the MPC’s intention to build and
sustain trust and credibility in monetary policy in line with its core mandate of
price stability.
Accordingly, I vote:
• to raise the MPR by 450 basis points to 23.25 from 18.75%

• to raise the Cash Reserve Ratio from 32.5 per cent to 45 per cent
• to adjust the Asymmetric Corridor around the MPR to +100/-700, and
• to retain the Liquidity Ratio at 30 per cent.

3. BALA M. BELLO
Opening Statement
I am honoured to participate in the first Monetary Policy Committee (MPC)
meeting for 2024. This meeting provides a unique opportunity to make wellinformed policy decisions, given the significant implications for Nigeria's
economic stability.
Decision
I voted to tighten the monetary policy stance further, by raising the monetary
policy rate (MPR) by 400 basis points from 18.75 per cent to 22.75 per cent,
increasing the Cash Reserve Ratio (CRR) by 1,250 basis points from 32.5 per
cent to 45.0 per cent, retaining the Liquidity Ratio at 30 per cent, and
adjusting the asymmetric corridor from +100/-300 basis points to +100/-600
basis points around the MPR. My decision was predicated on some important
developments
[summarized
below],
which
have
implications
for
macroeconomic stability in Nigeria.
Considerations
The prolonged upward trajectory of domestic prices requires decisive policy
actions to curb the trend, given its adverse implications for the value of the
naira and the economic well-being of Nigerians. Data from the National
Bureau of Statistics indicates that headline inflation increased year-on-year
(y-o-y) to 29.90 per cent in January 2024, from 28.92 per cent in December
2023, driven by lingering effects of the petroleum subsidy removal, continuous
exchange rate depreciation, surge in money supply, and persistent structural
challenges. Food and core inflation have also maintained an upward trend
(y-o-y). This is clearly a reflection of the need for coordinated monetary and
fiscal efforts to contain inflation.
The depreciation in the naira exchange rate with significant pass-through
effects further exacerbates the threat to price stability. Thus, keeping the
exchange rate within desired levels is crucial for price stability. While the
recent exchange rate policies implemented by the Central Bank of Nigeria
(CBN)
are
gradually
showing
some
positive
results,
implementing
complementary policy actions by the MPC and the fiscal authority that can
increase foreign exchange inflows in the short to medium term, will lead to
even better outcomes.

In addition, output performance remained positive, at 3.46 per cent in the
fourth quarter of 2023, up from 2.54 per cent in the previous quarter, a
development that gives the MPC latitude to focus on keeping inflation under
control. Although tightening monetary policy could potentially limit access to
credit and negatively impact output, it may be necessary to prevent inflation
from rising any further. If inflation persists, it could eventually erode any gains
made in output over time.

Borrowing costs are also expected to rise, possibly constricting loan growth in
view of the positive correlation between market lending rates and the MPR,
with adverse implications for asset quality. Although staff reports presented
at the meeting showed a resilient financial system with prudential ratios within
required levels and satisfactory stress test results, preserving financial system
stability as monetary policy contracts remains vital. The CBN’s vigilance and
proactive measures, such as the proposed recapitalization of commercial
banks, are, therefore, germane.

On the international scene, output recovery is tepid, while inflation, though
slowly responding to the tightened stance of many central banks, remains
broadly above long-run benchmarks. Monetary policy is, thus, expected to
remain tight over the medium term amidst lingering uncertainty. Nigeria must,
therefore, position itself as an attractive investment destination with high
yields.
Insummary, there is strong evidence that monetary policy considerations at
this meeting should prioritize reducing inflation and maintaining exchange
rate stability. Further tightening of the monetary policy stance will, in my
opinion, anchor inflation expectations and help attract the much-needed
foreign exchange inflows and accretion to reserves while triggering a
downward inflation trajectory. The Bank, must however, closely monitor the
markets
and
evaluate
unfolding
outcomes
to
prevent
unintended
consequences
of
well-intentioned
policy
actions.
The
foregoing
considerations reinforce my earlier vote.

4. BAMIDELE A.G. AMOO
International Economic Developments
Globally, many countries recorded slow and fragile growth in 2023 with
offsetting results. Although the USA economy expanded in Q4 2023, the Euro
Area stagnated while the UK and Japanese economies plunged into
recessions. However, we still expect stronger growth in 2024 over 2023 levels in
many countries, despite deepening tensions in Israel/Palestine, Israel/Egypt,
Russia/ Ukraine, USA/Russia, USA/China, China/Taiwan, and many conflicts in
Africa. The war in Ukraine/Russia is poised to further cripple the global
economy in 2024 as the EU and USA start targeting entities supporting Russia’s
war in Ukraine. Climate change and El Niño which are set to peak by mid2024 threaten food and water security in Africa and Middle East, causing
potentials for flood, drought, and heatwaves.
The outlook for the global economy output growth remains unchanged at 3.1
per cent in 2024. In developing markets, growth is expected to stabilize at
about same levels recorded in 2023 or drop slightly in 2024. Inflation is
expected to continue easing in 2024, although at a slower pace in most
countries. Red sea disruptions may escalate risks of geopolitical tensions that
may drive oil prices. Interest rates are unlikely to be cut until sometime in
Q2/Q3 2024. However, risks of rate hikes/hold are now emerging linked to
potential inflationary pressure and output cut from Red Sea trade disruptions.
When these situations occur, expectation of lower global inflation in 2024 and
prospects of rate cut by central banks, may not happen as the war and its
negative impact on Red Sea may incite inflation and cost of living during
2024. When this happens, the global monetary policy environment may
remain tighter for a long period.
Economic development in Africa was mixed in 2023. There were fragile and
offsetting growth recorded in major economies amidst regional tensions
which include: debt burden; fiscal stability issues; inflation and tight monetary
policy; weak intra-African trade as well as climate change, political and
economic stability.

Domestic Economic Developments
Information from staff reports indicated that Nigeria’s real GDP grew by 3.46%
in Q4 2023 (year on year) from 2.54% in Q3 2023 driven by the non-oil sector.
On annual basis, real GDP grew by 2.74% in 2023 from 3.1% in 2022. Headline
inflation rose to 29.9% in January 2024 from 28.92% in December 2023, due to
persistent supply gap, lingering ripple effects of the PMS subsidy removal.
Core inflation stood at 23.59% compared with 23.06% in December 2023, due

to fuel subsidy removal and amalgamation of exchange rate regimes,
among other factors. Consequently, food inflation rose to 35.42% (y-on-y).
High inflation put Nigeria into cost of living crisis which comes on the heels of
foreign exchange reforms and PMS subsidy removal that pushed petrol price
up by over 400per cent, straining households and businesses.
Another phenomenon was currency depreciation which made naira to hit
record lows against the dollar, reaching N1,700 per dollar, reflecting high
percentage of loss in value. Other issues were: low capital importation, forex
backlogs, and diversion of cargoes to neighboring countries to discharge.
CBN policy responses were timely and still on-going. They include lifting
restrictions on banned items, raising rates on 12-month Treasury Bills, transfer of
portion of NNPC’s earnings to CBN to stabilize the market and ease pressures
on the naira. The overall economy witnessed contractions as composite PMI
decreased to 48.5 points in January 2024 from 49.1 points in December 2023
below the 50 points threshold.
Expectedly, monetary aggregates, M3, increased at a rate of 18.25% to
N93.72 trillion at end-January 2024 compared with the preceding December.
When the growth in money supply is decomposed, data showed that 3.68%
growth in M1 indicate rising transactionary motive by consumers, which could
further worsen inflationary pressures in the economy.
The fiscal sector performance was mixed in January 2024. Federal
Government Revenue improved in January 2024 but was below its
benchmark of 16.4%. Oil revenue decreased by 14.7% relative to its level in
December 2023 but was 60.5% short of target. Non-oil receipts in January
2024 exceeded both target and preceding levels by 19.7% and 20.4%
respectively. Tax revenue also increased by 7.1% over its level in December
2023 and revenue distribution to sub-national governments was higher in
January 2024 by 3,5%. Overall, fiscal deficit in January 2024 was
contractionary relative to its benchmark.
Foreign reserves rose to US$34.54 billion by end-february 2024, from US$32.23
billion at end-January 2024. The average NFEM rate as at February 2024 stood
at N1480.58/USD giving a depreciation of 36.2 per cent, compared with
N944.08/USD in January 2024 due to demand pressure and persistent supply
shortages. The overall balance of payments deficit narrowed to US$0.28
billion in Q32023, relative to US$1.34 billion in Q22023, due to decline in
merchandise imports. Both the current and financial accounts recorded
surplus mostly resulting from favourable export developments and higher
investments in fixed income securities by non-residents. The economy also
recorded a higher capital inflow of US$ 2.86 billion relative to US$ 2.23 billion in
Q22023. However, the inflow of diaspora remittances declined by 7.4 per

cent to US$4.58 billion principally due to lingering global economic
challenges in advanced economies.
My Concern
Inflation remains my major focus at this meeting. Galloping Inflation, as
noticed in the last few months in Nigeria, is presenting an unacceptable
dimension as it poses a threat to investment and output growth. Inflation is
lowering real incomes of Nigerians and driving more people to poverty.
Inflation is hurting many Nigerians, whose nominal wages have remained
stagnant for many years. It is dragging down the values of wages, savings,
wealth and pensions for retirees. Price stability is a core function of the MPC,
and hence, the high level of domestic inflation is unacceptable.
Consequently, it presents a serious policy dilemma for the MPC given the
imperative to sustain the growth trajectory, limited tools at its disposal, low
productive capacity, high import dependency and the constricted fiscal
environment.
There is no doubt that there is a monetary component to the rising inflation in
Nigeria. Broad money grew over the months and stood at N 93.72 trillion at
end-January 2024 and the monetary base is forecasted to increase even
more in forthcoming months due to increase in FAAC allocation, and
associated spendings of the sub-national governments to reduce the various
outcry of citizens. Apart from the lag effects expected from the transmission
mechanisms from policy rates to causal factors of inflation, the underlying
causes of the inflation have not abated.
In order to reap the benefits of credibility and anchor inflation expectations,
good monetary policy should incorporate three main features : primacy of
price stability objective, rule-based behaviour implying a systematic response
to economic developments, and a firm response to inflationary shocks. High
inflation and its expectations are not unique to Nigeria. All countries of the
world are basically addressing same supply factors: energy prices, food
prices and strong dollar. The measures being taken are same: to tighten
monetary policy. In Africa, Ghana, Egypt, South Africa, along with their
counterparts in emerging and developing countries have revised upwards
monetary policy rates a couple of times since the beginning of the year.
It was evident from the MPC discussion that there is an urgent need to
promote more collaboration with the fiscal authorities now. There is also a
need for increased education and enlightenment to promote ethical
behaviors
by
people
and
leaders
to
promote
transparency
and
accountability across sectors. Government should also ensure that the
Compressed Natural Gas (CNG) programme designed to provide gas as
alternative motive fuel for transportation is aggressively implemented.

Improvement in electricity supply will also reduce the amount of fuel on
demand in the economy, and thereby moderate energy price input to the
local manufacturers.
My Vote
In consideration of the extant inflation level, I cast my vote to increase the
MPR by 400 basis points for high impact on macroeconomy and increase the
levels of other monetary parameters. Hence, I vote to:
A) Raise MPR by 400 basis points: from 18.75 % to 22.75%.
B) Raise CRR to 45.0% .
C) Raise LR to 35% .
D) Adjust asymmetric corridor around the MPR at +100/-300 basis points.

5. EMEM USORO
Global Economic Developments
There had been several developments in the global and domestic economic
environments since the last MPC in July 2023.
On the global front, in the past two years, economic activities had been
mixed following the slowdown that was occasioned by necessary monetary
policy tightening by major central banks to rein in inflation on one hand, and
a slowdown in the Chinese economy, on the other hand, that stemmed from
subdued demand and stress in the real estate sector. According to the US
Congressional Budget Office, the US economy is expected to slow down in
2024 from 2.2 percent in 2023 to 1.3 percent, as financial tightening is
expected to dampen demand pressure. Geo-political tensions between
Russia and Ukraine in Eastern Europe, and Israeli and Hamas in the Middle
East, which have increased energy prices are also contributing to reduced
demand.
Similarly, short-term growth prospects for many developing countries,
especially in Asia and Latin America, are deteriorating due to tightened
financial conditions, shrinking fiscal space, and sluggish external demand.
More so, low-income economies are facing increasing Balance of Payments
pressures and debt sustainability risks. Annual inflation in developing
economies is projected to exceed 10 percent in 2024, amid supply-side
disruptions, conflicts, and changing climatic factors. Consequently, local
food price inflation remains high in most of these countries, disproportionately
affecting the poorest households. This has largely eroded the economic gains
recorded following the COVID-19 recovery.
Growth has also remained subdued in the euro area, due to weaker
consumer sentiment and lingering effects of energy prices, amid tight
financial conditions. In addition, economies such as Japan and the United
Kingdom have slipped into technical recessions- while Japan witnessed
dampened private consumption and a decline in capital expenditure, the
UK experienced a drop in manufacturing, construction, and wholesale
output.
However, economic growth is set to rebound in Sub-Saharan Africa (SSA) in
2024, following a lukewarm performance in the preceding year. Growth in
SSA is expected to accelerate to 3.8 percent in 2024 and further strengthen
to 4.1 percent in 2025 as inflationary pressures weaken and financial
conditions improve.

Uncertainties in the global commodity markets, particularly concerning oil
and other energy prices, have heightened due to recent geopolitical risks in
the Middle East. Prices of certain agricultural commodities fell slightly due to
strong competition, improved crop conditions, and the arrival of recently
harvested cereals. This is expected to dampen global food inflation, thus
transmitting to lower imported food inflation.
Inflation in advanced economies has eased, albeit remained elevated and
above the long-run target, prompting major central banks in these regions to
soft-pedal on their aggressive policy stances.
According to the IMF, the outlook for global growth is optimistic, as the global
economy is expected to grow by 3.1% in 2024 and then accelerate by 3.2%
in 20251. This is predicated on departure from restrictive monetary policies, as
well as expected economic recovery in China and the euro area. Global
headline inflation is expected to fall from an estimated 6.8% in 2023 (annual
average) to 5.8% in 2024 and 4.4% in 2025. Notably, downside risks to this
outlook include heightened geo-political tensions emanating from conflicts,
protectionism that could stifle global trade, and electoral outcomes from
more than 75 countries. These risks could distort energy and financial markets,
resulting in dampened growth and inflationary pressures.
Domestic Economic Developments
On the domestic front, economic activity gained momentum since the last
MPC, reflected by the real GDP growth of 3.46% in Q4 2023, from 2.54% in Q3
2023, resulting in an average growth of 2.74% in 2023. This momentum was
driven by the non-oil sector, which grew by 3.07% in Q4 2023, compared with
2.75% recorded in Q3 2023. Similarly, the oil sector grew by 12.11%, compared
with 0.85% contraction in Q3 2023.
Domestic crude oil production has risen from an average of 1.08 mbpd in July
2023 to 1.34 mbpd in December 2023, and further to 1.48 mbpd in January
2024, due to improved pipeline infrastructure security and crude oil
production/exportation. This is expected to improve the inflow of oil receipts
and enhance accretion to external reserves.
With respect to price developments, headline inflation rate has risen steadily
to 29.90% in January 2024, up from 24.08% in July 2023, which is not
unconnected to the removal of PMS subsidy, the adoption of a marketbased exchange rate system, intensified consumer spending, credit
expansion, particularly Ways and Means, and the exchange rate passthrough to domestic prices. Food inflation, the major driver of headline
inflation, rose steadily from 26.98% in July 2023, to 35.41% in January 2024,

1 IMF World Economic Outlook, January 2024

underpinned by high transportation and logistics costs, as well as prevailing
insecurity and infrastructural deficits. Core inflation also trended northward,
from 20.47% in July 2023 to 23.59% in January 2024, owing to exchange rate
pass-through and demand pressures.
Notably, broad money and inflation have moved almost in tandem as broad
money supply (M3) expanded by 18.25% at the end of January 2024. This
growth was ascribed to a rise in other deposits, transferable deposits, and
securities other than shares, by 26.55%, 4.73%, and 99.98%, respectively. From
the asset side, Net Domestic Asset (NDA) contributed significantly to broad
money growth while Net Foreign Asset (NFA) subdued growth in broad
money. The steady rise in inflation has resulted in negative real interest rates.
The financial system remains resilient as reflected by financial soundness
indicators which remained within regulatory limits. In addition, recent reports
from international rating agencies such as Fitch, Moody’s, and S&P, have
upgraded Nigeria’s ratings from stable to positive.
External reserve position stood at US$34.54 billion as of February 21, 2024, from
US$33.31 billion at end-July 2023, majorly driven by receipts of crude oilrelated taxes and third-party receipts. The level of reserves could finance 6.9
months of import for goods and services, and 9.8 months of import for goods
only.
Recent measures put in place by the fiscal and monetary authorities to
recalibrate policy objectives, improve credibility, drive market efficiency,
and promote transparency and accountability have complemented efforts
towards achieving price stability. For instance, the removal of fuel subsidy,
adoption of a market-determined exchange rate, and the introduction of tax
reforms have fostered market liberalisation and price discovery. Also, the
change in the Central Bank’s management team which seeks to re-focus the
Central Bank on its core mandates and re-define narratives about the Bank
has improved confidence in the Central Bank.
Going forward, the growth outlook remains positive, as output is expected to
maintain an upward trajectory in Q1 2024 and Q2 2024, respectively.
Inflationary pressures may persist in the near term partly on account of the
lingering impact of PMS adjustments, import costs, exchange rate passthrough, and growth in money supply. Furthermore, expectations around the
country’s external position remain optimistic, driven by favourable crude oil
prices and increased domestic oil production.
My Considerations
i.
Global Economic Recovery and Nigeria's External Account - The
resilient recovery in global economic activities, particularly in

advanced economies and some EMDEs2, signals optimism for Nigeria’s
external account given its reliance on demand for oil, globally.
However, broader escalation of conflicts could disrupt energy markets,
trade dynamics, and financial markets, leading to dampened growth
and inflationary pressures.
ii.
Domestic macroeconomic concerns - The domestic economy is
experiencing elevated inflation and exchange rate volatility, which
have impacted price levels and real income negatively. Persistent
inflation has impacted the purchasing power of the general populace
adversely, thus, heightening uncertainty around future path of general
prices, and propelling currency substitution.
iii.
Broad money and banking system liquidity – Monetary and financial
conditions analysis revealed episodes of liquidity surfeit in the
economy. Importantly, the deviation of broad money growth from its
regulatory benchmark has had inflationary effects on the economy.
iv.
Money Market Rates - Furthermore, dynamics of key money market
rates are indicative of liquidity conditions as average prime and
maximum lending rates exhibited downward trends.
v.
Monetary Policy Stance and Transmission Channels – the real interest
rate had remained negative, far below the neutral rate of interest,
hinting at an accommodative monetary policy stance.
vi.
Policy Coordination Efforts and Strategic Alliances - The impact of the
recent policy coordination efforts by the monetary and fiscal
authorities, particularly around the strategic alliance with NNPCL, to
repatriate all Naira and foreign currency proceeds to accounts
domiciled in the CBN, aimed at simultaneously containing liquidity in
the banking system and providing FX liquidity is beginning to achieve
results.
My vote
i.
The domestic economy is faced with a mix of rising inflation, subdued
economic growth and exchange rate volatility. Hinged on the resolve
to focus on its primary mandate of ensuring price stability, the MPC is
poised to utilise the full range of the instruments available to it to
address the liquidity surfeit, as well as attract foreign portfolio
investment that would cater for liquidity conditions in the FX market.
ii.
Resultantly, I vote at this meeting to:
a. Raise the MPR by 400 basis points in a bid to tighten financial
conditions, and rein in inflation;

2 EMDEs means Emerging Markets and Developing Economies

b. Adjust the asymmetric corridor around the MPR to +100/-700
basis points from +100/-300 basis points to contain cost of liquidity
management;
c. Raise the CRR to 40.0% from 32.5% to complement the increase
in the policy rate and support liquidity management; and
d. Retain the LR at 30.0%.

6. JAFIYA LYDIA SHEHU
Global growth recovery remained resilient, despite the dampening effect of
the withdrawal of fiscal stimulus in many economies, geo-political tensions
and their disruptive effect on the supply chain, as well as monetary tightening
by many central banks to control inflation. Consequently, the IMF in its
January 2024 World Economic Outlook (WEO) forecast global growth at 3.1
percent and 3.2 percent in 2024 and 2025, respectively. This is partly on
account of the strong growth momentum in the United States and sustained
recovery of the Chinese economy. Growth in Advanced Economies is
projected to moderate to 1.5 percent in 2024 and rise further to 1.8 percent in
2025, while in Emerging Market and Developing Economies (EMDEs), it is
envisaged to remain at 4.1 percent in 2024 and increase marginally to 4.2
percent in 2025.
On global price developments, whilst Inflationary pressures continue to abate
across many Advanced Economies, particularly in the Euro Area and the
United States, a slow pace of decline which could keep inflation above their
long-run target, is foreseen in 2024. Already, the IMF projects global inflation
to moderate to an annual average of 5.8 percent in 2024, which is above
many Advanced Economies long-run targets, signifying the persistence of
inflationary pressures. This calls for a cautious approach to monetary policy.
World trade is expected to rise to 3.3 percent in 2024, from 0.4 percent in
2023, and further to 3.8 percent in 2025 (IMF, WEO January 2024). The
projected increase reflects a moderate normalisation of trade, following
severe weaknesses in the previous year, and alignment of global demand
towards services. Downside risks to the outlook, is the ongoing geopolitical
tensions, particularly in the Red Sea and further rise in protectionist measures.
It is noteworthy that foreign investment inflows into EMDEs increased by 23.1
percent in January 2024 compared with the position recorded in December
2023. This suggests positive investors’ appetite for emerging market treasury
securities and stocks. Nonetheless, envisaged tight financial conditions in
Advanced Economies in 2024, portend contraction of capital flows to EMDEs.
THE DOMESTIC ECONOMY
Real GDP year-on-year grew by 3.46 percent in Q4 2023 from 2.54 percent in
Q3 2023. Growth performance hinges on upbeat reforms, higher crude oil
production and prices, increased investments in the oil and ICT sub-sectors,
and renewed efforts to improve infrastructure. The non-oil sector grew by 3.07
percent, in real terms in Q4 2023, higher by 0.32 percentage point relative to

Q3 2023. The oil sector grew by 12.1 percent compared with 2.22 percent
contraction in Q3 2023. Downside risk to growth are high inflation and
exchange rate pressures, which have slowed down business activities, as
corroborated by the decline in the Composite Purchasing Managers Index
(PMI), which decreased to 48.5 points in January 2024 from 49.1 points in
December 2023, below the expansion threshold of 50 index points. Among
comparator countries, Kenya’s output expanded by 1.35 percent in Q3 2023
and is forecast at 2.7 percent in 2024, South Africa’s economy contracted by
-0.7 percent and is estimated to grow by 1.0 percent in 2024, while Ghana’s
growth moderated to 2.0 percent and is predicted at 1.2 percent in 2024.
Inflationary pressures persist as Headline inflation year-on-year rose further to
29.90 percent in January 2024, from 28.92 percent in December 2023, largely
due to high transportation costs, increased cost of imported goods arising
from exchange rate pass-through to domestic prices, including, persistent
security challenges. Disaggregating the headline inflation, shows that food
inflation year-on-year rose to 35.41 percent from 33.93 percent in December
2023, while core inflation (headline less farm produce and energy) inched to
23.59 per cent, compared with 23.06 per cent, in December 2023.
Domestic crude oil production rose by 6.7 percent in January 2024, to 1.43
mbpd, even though it was below the OPEC production quota of 1.578 mbpd
by 0.148 mbpd. The improvement is attributable to the enhanced security in
the oil producing region, and improved governance structure and reforms in
the oil industry. As at February 22, 2024, the average price of Bonny Light rose
by 4.1 per cent to US$85.57 pb, compared with US$82.18 pb in the preceding
month. The price of Bonny Light was US$4.73 pb higher than the 2024 budget
benchmark of US$77.96 pb which would accrue to the Federal Government
as foreign exchange gains.
Broad money supply (M3) rose by 18.25 percent to ₦93.72 trillion at endJanuary 2024, over preceding December.
The external reserves stood at US$34.54 billion as at February 21, 2024, from
US$32.23 billion in the previous month. The level of reserves could finance 6.9
months of import of goods and services, and 9.8 months of import of goods
only, based on import statistics for Q3 2023. Banking system Financial
Soundness Indicators (FSIs) revealed salutary performance in the review
period.
CONSIDERATION FOR VOTING
I considered the various contending objectives of monetary policy, which
include price stability, output growth and exchange rate stability, in arriving
at a policy decision. Indeed, addressing inflation and growth objectives

require a delicate balance, considering the tradeoff between them. Though,
monetary policy tightening, could be a disincentive to investment, but a low
and stable price level contributes to macroeconomic stability, including
economic growth. Real GDP has remained positive since the country exited
the COVID-19 induced recession. Staff forecast suggests further improvement
in output growth at 3.20 percent and 3.22 percent in Q1 2024 and Q2 2024,
respectively, reflecting the short-term impact of the oil, tax and monetary
reforms.
I am convinced that in view of the persisting rise in headline inflation,
monetary policy tightening is appropriate at this time. The preceding
domestic economic analysis shows that inflationary pressure is driven by
monetary (high growth in money supply) as well as by structural factors such
as high energy costs, exchange rate depreciation, infrastructural challenges,
and insecurity. Hence, dealing with the problem requires policy coordination
between the fiscal and monetary authorities.
The rebound in the oil sector and the sustained contribution of non-oil sector
to real GDP growth is noteworthy. The fiscal authority has made substantial
progress in automating tax collections which has boosted non-oil revenues
and blocked leakages. Government’s efforts at addressing insecurity has
seen a substantial increase in oil production. Significant efforts are being
made to also address security challenges confronting the food producing
belts, as well as tackle the high cost of transportation through heavy
investments in the CNG Bus project. Other fiscal measures aimed at
improving food crop production, increase supplies and moderate prices,
include efforts at developing dry season farming, build storage facilities and
facilitate grain release from the strategic grain reserves.
Nigeria’s inflation is almost above its tolerable threshold and monetary policy
may lose its potency over domestic prices and its ability to anchor
expectations if an urgent and plausible action is not taken at this time. Also,
in light of tightened global financial conditions, and capital flows returning to
EMDEs, a tightened monetary policy stance could encourage foreign
investment inflow, increase accretion to reserves and restore stability in the
foreign exchange market. A complimentary measure would be to create
incentives to boost non-oil exports, as well as improve diaspora remittances.
In light of the foregoing considerations, I vote at this meeting for a raise in the
Monetary Policy rate (MPR) to 22.75 percent, an increase in the Cash Reserve
Ratio (CRR) to 45.0 per cent, an adjustment in the asymmetric corridor
around the MPR to +100/-600 basis points, and the retention of the liquidity
ratio at 30.0 per cent.

7. LAMIDO ABUBAKAR YUGUDA
The Monetary Policy Committee (MPC) meeting of 26-27 February 2024, the
first since July 2023, took place against a backdrop of slow but resilient
recovery in global economic growth, moderately declining global inflation
and tight monetary policy in most advanced economies. On the domestic
front, real output growth increased significantly in the fourth quarter of 2023
buoyed by a pick-up in growth in the oil sector. However, headline inflation
continued to rise, reaching 29.90 percent in January 2024 (with both food
and core inflation increasing). The rise in inflation was owing to the
depreciation of the Naira/US dollar exchange rate following the adoption of
a liberalized exchange rate regime in June 2023, and other domestic
monetary and structural factors.
Global Economic Developments
Global economic growth remained subdued at 3.1 percent in 2023 on
account of tepid growth in advanced economies owing to the effects of the
tight monetary policies, and weak growth in the emerging markets and
developing economies (EMDEs). The International Monetary Fund’s (IMF)
World Economic Outlook (WEO) in January 2024 forecast global economic
growth remaining at 3.1 percent in 2024 and increasing slightly to 3.2 per cent
in 2025 due to expected resilience in advanced economies and policy
support in China to address weakness in its property sector.
Global inflationary pressures are receding significantly. Inflation was
estimated at 6.8 percent in 2023 and is expected to decline to 5.8 percent in
2024 and 4.4 percent in 2025 owing to lower energy and food prices. Inflation
in advanced economies is expected to trend down from 4.6 percent in 2023
to 2.6 in 2024 and 2.0 in 2025, with US inflation moderating to 3.1 per cent in
January 2024 from 3.4 percent in the preceding month. The level of inflation
in emerging markets and developing economies is also expected to
moderate from 8. 4 percent in 2023 to 8.1 percent in 2024 and 6.0 percent in
2025. While these levels are still above the inflation targets of most major
central banks, inflation has declined faster than expected and the outlook is
for continued moderation given the tight monetary policy stance.
In February 2024 crude oil prices rebounded (to above US$82 per barrel for
the Opec basket and above US$85 for Nigeria’s Bonny Light crude) after
three consecutive months of decline in response to voluntary oil cuts
announced by major producers and easing futures selling. In 2024 the crude
oil price is expected to average US$82 per barrel as demand growth
concerns in China persist.

Major global equity markets have shown positive performance since the
beginning of the year as inflation pressures subsided pointing to expectations
about possible cuts in interest rates by leading central banks, although the
timing of such cuts remain uncertain. Foreign exchange markets have
responded to this uncertainty as most currencies depreciated against the
USD since the beginning of the year. Capital flows into emerging markets
increased to US$35.7 billion in January 2024 from US$29 billion in December as
investor sentiments improved. In the medium-term there are prospects that
flows into emerging markets would improve partly owing to expectations of
relaxation of the tight monetary policies in advanced economies.
Domestic Economic Developments
Output growth picked up strongly in Q4 2023 mostly on account of the strong
performance of the oil sector (12.11 percent growth in Q4 2023 versus 2.22
contraction in Q3 2023) owing to higher crude oil production. However, yearon-year GDP growth slowed down from 3.10 percent in 2022 to 2.74 per cent
in 2023 reflecting slower growth in agriculture and services and a modest
improvement in manufacturing.
Strong inflationary pressures persisted into the new year with the January 2024
headline inflation reaching 29.90 percent compared to 28.92 percent in
December 2023 and 21.82 percent in January 2023. Food and core inflation
have also spiked reaching 35.41 percent and 23.59 percent respectively in
January 2024. The surge intensified in mid-2023 when petroleum subsidies
were removed and a market-based exchange rate regime was adopted,
eroding consumer purchasing power and threatening to undermine
macroeconomic stability as well as economic growth unless a strong policy
response adopted to rein in inflation and anchor inflation expectations
downwards.
Gross Federation Account receipts at NGN 1,474.43 billion in January 2024
were 10.1 percent higher than the collection in December 2023, but missed
the budget benchmark by 16.4 percent. Tax collections improved
significantly to 7.1 percent of GDP compared to 6.2 percent of GDP in
December 2023, on account of increases in corporate income tax and
value-added tax (VAT) collections. However, this level is far below the West
African Monetary Zone (WAMZ) tax-to-GDP benchmark of 20 percent.
Oil revenue declined by 14.7 percent relative to December 2023 and was
60.5 percent short of the budget target. Over the past few years, the Nigerian
economy has suffered persistent underperformance in oil output and oil
revenue owing to decreased production attributed to pipeline vandalization,
oil theft, inefficiency and a variety of other factors.

To address the current macroeconomic difficulties effectively all avoidable
production and revenue losses in the oil sector must be fixed. Since oil
revenues accrue in foreign exchange, restoring the lost revenue by improving
security in the oil fields and along the pipelines - and generally insisting on a
higher level of efficiency and transparency in the oil sector - should improve
both government revenue and the nation’s foreign exchange reserves.
From the data reviewed it seems this process has started. The oil sector grew
by 12.11% in Q4 2023 compared with 2.22% contraction in Q3 2023. The
recent announcement of the agreement between the Federal Ministry of
Finance, NNPC Limited and the CBN on the domiciliation of all oil revenues in
the CBN is a welcome development and should help improve transparency
and accountability in the management of oil revenues. Increasing domestic
oil output and a stable oil price at above USD80 per barrel should markedly
increase Nigeria’s oil revenue, boosting both the fiscal space and the
external reserves position.
The Federal Government of Nigeria (FGN) retained revenue in January 2024
was 1.7 percent and 47 percent lower relative to the December 2023 level
and the budget target, respectively. On the other hand, expenditure was 3.5
percent and 15.2 percent below the December 2023 and the target,
respectively. This means that relative to the budget target, revenue has been
more compressed than expenditure resulting in a fiscal deficit that was 17.4
percent higher than the benchmark, and at 6.1 percent of GDP the fiscal
deficit was twice the WAMZ benchmark of 3 percent of GDP.
Consequently, while the removal of petroleum subsidy and the unification of
the exchange rate have reduced government expenditure and improved
revenues, a stronger fiscal effort is needed to enable the Federal
Government fund its necessary programmes without recourse to borrowing.
Total public debt at 39.1 percent of GDP is within the DMO’s ceiling of 40
percent of GDP, but the debt-service-to-revenue ratio at 179 percent is more
than three times the 50 percent benchmark. This is another reason for
reducing expenditure, slowing the accumulation of debt and targeting the
collection of more revenue to improve fiscal sustainability.
Loose monetary conditions prevailed in Nigeria for most of 2023. Reserve
money increased by 54.28 percent between December 2022 and December
2023, while broad money (M3) increased by 50.88 percent over the same
period, well above the provisional benchmark of 28.21 percent. The 50.88
percent increase in broad money from NGN 52.2 trillion in December 2022 to
NGN 78.7 trillion in December 2023 was driven mostly by a 46.27 percent
increase in net domestic assets (NDA) which rose by NGN 22.4 trillion. In other
words, this represents additional credit created in the economy. While reserve

money declined by 2.34 percent in January 2024 relative to December 2023
driven largely by decline in liabilities to Other Depository Corporations
(ODCs), broad money (M3) increased by 18.25 percent over the one-month
period, thereby adding to the high level of excess liquidity in the system.
The banking system remained sound over the review period with capital
adequacy ratio was above 10 percent and non-performing loans (NPLs) of
4.15 percent. Liquidity ratio was 42.83 percent in January 2024, significantly
above the regulatory minimum liquidity ratio requirement of 30 percent and
20 percent for commercial and merchant banks, respectively.
The capital market equities witnessed a bullish performance as the All-Share
Index (ASI) rose by 35.28 percent in January 2024 while market capitalization
increased by 35.29 percent over the respective levels in December 2023.
Foreign participation in the capital market is gradually increasing as the
recent economic reforms begin to improve foreign investor confidence.
The overall balance of payments deficit narrowed. This was on account of a
higher current account surplus owing to favourable export developments
and decline in merchandise imports which moderated the deficit on the
financial account where significant outpayments accrued to non-residents as
investment income (returns on investment - interest and dividend). Personal
home remittances from Nigerians in the Diaspora declined.
The external reserves stood at US$34.54 billion as of 21 February 2024 an
increase of US$2.31 from the level in December 2023. This could finance 6.9
months of imports of goods and services.
Policy Decision
The key issues that the MPC must confront at this meeting are the rapidly
rising inflation and the significant depreciation of the Naira. My preference
was for the MPC to signal its resolve to fight inflation by significantly raising the
monetary policy rate (MPR) and adopting strong measures to limit excess
liquidity in the banking system.
I noted the concerns about the effect of a high MPR on economic growth.
However, the first priority of the MPC is to fight inflation and try to re-anchor
inflation expectations because unchecked inflation also has a negative
effect on growth in addition to its other adverse consequences.
The data show that the relationship between growth and inflation is
multidimensional – at lower levels, inflation energizes growth, while after the
threshold it begins to hurt. The computed threshold for Nigeria and other
EMDEs is in the range 11-16 percent. Thus, at the current 29.9 percent
inflation, the adverse effect on growth is easy to see, especially considering

the effects of inflation on consumption. The erosion of purchasing power
reduces the aggregate level of consumption, which in turn would drag the
growth of the national income. Also, the lower savings rate implies
inadequate accumulation of capital which is essential for long-term
investments and growth.
Rising inflation and exchange rate depreciation are self-reinforcing, as an
increase in inflation exacerbates the depreciation of the exchange rate via
increasing interest rate differentials, while the deterioration of the exchange
rate worsens inflation through the pass-through effect.
The Naira has depreciated by over 66 percent as a result of the policy switch
to a more flexible exchange rate system. This was nurtured and worsened by
the excess liquidity in the banking system as indicated by the marked
increase in reserve money and broad money over the last one year.
With the depreciation of the Naira, another concern is bank asset quality.
While the banking system remained resilient during the review period, with
capital adequacy, liquidity and non-performing loan ratios all within normal
prudential limits. It was therefore very necessary that policy action be taken
to slow and reverse the implied undervaluation of the Naira.
In consideration of the foregoing, I voted as follows:
Tighten the Monetary Policy Rate (MPR): by 300 basis points to 21.75%
Increase the Cash Reserve Requirement (CRR): by 1750 basis points to 50%
Retain the Liquidity Ratio (LR) at 30%
Widen the asymmetric corridor: to +100/-600 basis points around
the MPR.

8. MUHAMMAD SANI ABDULLAHI
My Vote
In recognising the current inflationary trend and developments in the foreign
exchange market, the extant monetary policy stance should be further
tightened to address inflationary concerns, raise real interest rates towards
positive trajectory and incentivize capital inflows. I am convinced that a
decisive step to raise the Monetary Policy Rate (MPR) significantly will align
our stance with the urgency of the situation and signal our unwavering
commitment to tackling inflation. In effect, I voted to:
1) Raise the MPR by 400 basis points to 22.75 per cent from 18.75 per cent.
2) Adjust the asymmetric corridor to +100/-400 from +100/-300 basis points
around the MPR.
3) Raise the CRR to 45 per cent from 32.5 per cent; and
4) Retain the Liquidity Ratio at 30 per cent.
My Considerations
As a member of the Monetary Policy Committee, I am deeply concerned
about the prevailing inflationary pressures and our imperative to address
them effectively. Having listened to all the technical presentations, surveyed
cross-country experiences, and held enlightening conversations with other
MPC members, we cannot afford to allow inflation to persist as a lingering
issue. The urgency of the current situation demands swift and resolute action
from the MPC. The Committee must convey a clear message that we are not
only willing but determined to decisively confront inflation head-on.

While the fiscal policy is poised to emphasize social interventions and revenue
generation in the current year, and shifting the focus towards growth in 2025,
it becomes incumbent upon the monetary policy realm to take a proactive
stance to dampen the lingering inflationary pressure. Neglecting the
significance of addressing inflation or delaying policy adjustments can lead
to prolonged economic woes, as evidenced by the experiences of various
countries that have had to grapple with soaring inflation before
implementing corrective measures.

In our conversations in the past two days, we analysed the drivers of inflation
to include the global nature of the phenomenon, the persistence of food,
rising energy costs, the liquidity risks posed by significant monthly injection
through the Federal Account Allocations Committee (FAAC), the effect of
excess liquidity from the CBNs quasi-fiscal development finance interventions,
credit to government or Ways and Means advances going as far back as
quantitative easing during the Covid-19 era, the risks posed by emerging

technologies and cryptocurrencies and the foreign exchange pass through
to inflation.

Notwithstanding, the CBN in response to the drivers above has already taken
some deliberate actions particularly the restriction of Ways and Means
advances to the statutory provisions, the halt of development finance
interventions and various measures to stem banking system liquidity. At this
MPC meeting, it is critical that we expand on these measures to achieve
holistic response to achieving price stability. Furthermore, as we navigate this
economic landscape, it is crucial to consider the vital role of foreign portfolio
investments (FPIs) in bridging the supply gaps in the foreign exchange market.
By concurrently raising interest rates, we can create an environment that
attracts FPIs, thereby bolstering the stability of our foreign exchange reserves
and signaling our resolve and commitment to ensure price.

The strategy of implementing gradual rate hikes, while often perceived as a
cautious approach, may inadvertently prolong the corrective process and
economic uncertainties. Research and historical evidence suggest that,
singular substantial rate hikes can yield more effective outcomes in
addressing inflationary pressures and restoring macroeconomic equilibrium.

It is also critical that we revisit the efficacy of our monetary policy transmission
mechanism to enhance our decisions. In adopting a proactive approach to
communication, it is critical that this MPC meeting sees significantly improved
communication through all channels and curated for all stakeholders given
the current interest of the nation in the decisions of this Committee. By taking
these assertive measures, we aim to instill confidence in the economy,
reinforce price stability, and create a conducive economic environment for
sustainable growth prospects.

I acknowledge the bold reforms by both the monetary and fiscal authorities
as the trajectory suggests that the reforms would successfully anchor inflation
expectations and lead the markets towards the attainment of the price
stability objective of the Bank. I am mindful that my decision will certainly
have some trade-offs. I have carefully weighed the empirical evidence of the
sacrifice ratio for growth which showed possible output loss in the near term.
Nonetheless, I am convinced that the CBN monetary policy must defy gravity
and give greater value to Nigerians by safeguarding the economic wellbeing of our nation and its citizens. It is therefore paramount that we act
decisively and collectively in ensuring that monetary policy delivers on its
mandate as inflation could become more persistent and pervasive and
eventually hurt output growth if not dealt with expeditiously.

Global and Domestic Developments
Despite several lingering downside risks and uncertainties, global output
recovery remains resilient as key indices show a positive outlook for the global
economy. The International Monetary Fund (IMF) projects global output
expansion of 3.1 per cent in 2024 and 3.2 per cent in 2025 due to stronger
than expected resilience in advanced, emerging market, and developing
economies. Globally, the robust response by monetary and fiscal authorities
will continue to support the recovery and create jobs required to push the
global economy to full recovery. The moderation in global inflation is
projected to continue in 2024, anchored on lower core inflation because of
still-tight monetary policies, a related softening in labour markets, and passthrough effects from earlier and ongoing declines in relative energy prices.
Global inflation is projected to decline to 5.8 and 4.4 per cent in 2024 and
2025, respectively.
Nigeria has had to simultaneously confront slow output recovery, persistent
inflationary and exchange rate pressures. Activities in the domestic economy
expanded further for the twelfth (12) consecutive quarter by 3.46 per cent
(year-on-year) in Q4 2023 compared with 2.54 per cent in Q3 2023 driven
majorly by the services sector which recorded a growth of 3.98 per cent and
contributed 56.55 per cent to the aggregate GDP. The industry sector grew
by 3.86 per cent while agriculture sector grew by 2.10 per cent. On an annual
basis, GDP grew by 2.74 per cent in 2023 relative to 3.10 per cent in 2022.
Staff forecast indicate a faster pace of GDP growth of 3.20 per cent in Q1
2024. Domestic crude oil production ramped up to 1.43mbp on account of
deliberate measures by the FGN to enhance security around oil infrastructure
in the Niger Delta region.

Inflationary pressure continued to persist as headline inflation rose further for
the twelfth consecutive month to 29.90 per cent in January 2024, driven
largely by food prices. Both food and core components have consistently
risen over since the past three (3) months. Staff projection indicates that
inflationary pressure would remain in the near term.

Money supply increased in the period under review and was above the
provisional benchmark when annualised. Broad money supply (M3) rose
year-to-date by 18.25 per cent to ₦93.72 trillion at end-January 2024, from
N79.25 trillion over the preceding December, driven by an increase in both
Net Domestic Assets (NDA) and Net Foreign Assets (NFA), indicating the
existence of excess liquidity in the system and the need for further tightening.
Banking system aggregate credit, on a year-to-date basis, also increased by
23.14 per cent in January 2024.

In the external sector, the current account posted a higher surplus of US$3.28
billion (4.0 per cent of GDP), in Q3 2023compared to US$0.81 billion (0.8 per
cent of GDP) in Q2 2023, due largely to a higher trade surplus associated with
favourable oil export development, the performance of the external sector
remained subdued by global economic uncertainties amid tight financial
conditions.

The performance of the banking sector remains safe, sound, and resilient,
largely due to the proactive monetary policy stance of the Bank and other
complementary regulatory measures.

9. MURTALA SABO SAGAGI
Context
Over the last 10 years, the Nigerian economy remains weak and vulnerable
to external shocks and volatilities mainly due to domestic structural
challenges. The oil price shocks of mid 2015 continued to slow down the
economy forcing the country into recession by the second quarter of 2016.
Even though, the economy exited recession in the second quarter of 2017,
the attempts to diversify the economy away from oil, such as the Zero-oil Plan
and Economic Recovery and Growth Plan 2017-2020 were, at best,
unsuccessful. Nigeria’s export earnings, local revenues and, predictably,
economic growth slumped. With an elevated fiscal constraint, the country
resorted to massive and unprecedented borrowing. The limited agricultural
productivity and value addition coupled with limited progress in tapping into
high value services and the knowledge economy conditioned Nigeria to
massive imports and persistent balance of payment challenges. The impact
of the current global food and energy crisis induced by the Russia-Ukraine
war underscores the fragility and vulnerability of the Nigerian economy to
persistent global commodity price instability. The causes of inflationary
tendency of the economy is a subject of intense debate. However, the
combined effects of years of policy inconsistencies, dearth in dynamic
governance from both the fiscal and monetary sides, deteriorating domestic
security and falling productivity in key sectors have contributed to the
worsening of the economy’s fundamentals.
Global and Regional Dimensions
The world is gradually adjusting to the shocks emanating from conflicts and
volatilities. The policy responses to the shocks varied among the developed
and developing economies. As many developing economies grapple with
increasing costs, United States, European Union and Japan were able to
curtail inflation by lowering consumer cost elements in the form of reduced
energy, food, housing costs as well as the effective use of social safety nets.
In general, inflation is projected to decline in 2024 mainly due to anticipated
reduction in food and energy prices as global supply chain improves and
efforts to target inflation are sustained. This explains why most countries retain
or ease interest rates. It is interesting to note, however, that a number of
countries in Africa are also expected to witness noticeable economic
improvements. The recent Macroeconomic Performance and Outlook (MEO)
released by the African Development Bank Group included eleven African
countries among the world’s 20 fastest-growing economies in 2024.
Unfortunately, Nigeria did not make the list. This is at a time when the
expected growth in Africa of 4.1% exceeds the projected global averages.

Domestic Dynamics
The asymmetry between GDP growth rates and welfare in Nigeria has been
well established. This is mainly because the gains of the little economic
growth that has occurred do not effectively trickle down suggesting noninclusive/rentier economic landscape. The dominance of oil revenue in
export earnings created massive economic dislocation and it will be perilous
to base the nation’s economic prospect on the temporary relief from
increased oil export and its effect on the balance of payment. With the
current foreign exchange crisis and aggravating inflationary pressures, a fresh
look at policy tool kits is imperative.
Today, inflation is at its record high in Nigeria and, as a norm, the Bank will
contemplate an adjustment to the MPR to attain a short-term stability.
However, there is evidence to suggest that previous attempts have been
largely unsuccessful. Possible reasons include:
a. A weak link between the banking sector and the real sector. Only few
sectors have access to formal bank loans.
b. Only about 5% of nearly 35 million small and medium enterprises, providing
60-70% of output, have access to formal loans.
c. Food inflation which is generally structural, not monetary, is a huge
contributor to core inflation basket and there is no credible evidence to
suggest that the country is moving towards attaining food security in the
medium term.
It is, therefore, not surpassing that approaches to tame inflation in the short
run tend to negatively impact on medium term growth in the last decades.
The Figure below shows the relationship between inflation and MPR in Nigeria.

Source: NBS & CBN Data

Since early 2022, the reduced confidence in Naira induced many Nigerians
to take refuge largely in the US Dollar. Also, the country’s balance sheet,
macroeconomic indices, and deteriorating business conditions scared away
foreign investors living only a handful of speculative portfolio investors. This
coupled with massive currency speculation led to the free fall of Naira
thereby worsening the inflation.

In view of this, I would be more inclined to ascribe the current price instability
to (a) domestic policy inadequacies and (b) internal structural rigidities rather
than any external factors such as the prolonged Russia-Ukraine conflict and
other global volatilities. This does not, however, imply that global dynamics
are inconsequential.

Accordingly, I summarized the recent and systemic policy actions and
inaction that engender macro-economic instability in Nigeria as follows:

Recent
i.
The closure of Nigeria’s land border with the neighboring countries,
particularly, between 2017 and 2023, has disrupted the movement of
food and livestock.
ii.
Excessive abuse of ways and means which compromised previous
monetary stance, especially in 2021 to 2022.
iii.
Large scale sectoral injection of funds by the CBN without effective
due diligence on the sub-sectors and the private sector beneficiaries.
iv.
The poorly-conceived Naira redesign policy towards the end of 2022
and its spill-over effects up to the second half of 2023.
v.
Removal of fuel subsidy with a limited pathway to cushion its wider
social impact.
vi.
Exchange rate unification after prolonged foreign exchange market
manipulations which resulted in the unprecedented depreciation of
the Naira.
vii.
Climate change, especially unchecked and persistent flooding and
deforestation

Systematic
i.
Lack of crude oil refining capacity often leading to domestic shortages
and high cost of energy. This also aggravated Nigeria’s fiscal crisis;
ii.
Neglect of agricultural transformation, thereby worsening food security
–low productivity and value addition, and high post-harvest losses in
the region of 40-60%, leading to off-season shortages and high food
prices;
iii.
Mismanagement and corruption in the administration of the subsidy
regimes;

iv.
Massive debt accumulation and high debt-service to revenue ratio;
v.
Weak non-oil export diversification drive;
vi.
Poor governance and weak public financial management practices,
and
vii.
Persistent domestic insecurity.
Considering these, it is my view that monetary policy consideration (i.e. readjustments) will have limited impact on inflation rates unless they are
complimented with efforts to address insecurity and food shortages. This is in
addition to holistic and disciplined roadmap for economic and social
rejuvenation.
Prospect for 2024
From 2015 to mid-2023, the CBN had assumed the role of economic
managers in addition to its mandate as regulator and price stabilizer. The
erratic policies and interventions pursued created deficit of confidence.
Interestingly, from January, 2024, the determination of the Bank to take
corrective measures, implement swift action against currency speculators
and infractions by banks has been glaring as reflected in the renewed boost
in the activities of the financial market. With clearer policy statements,
solution orientation towards achieving disciplined policy implementation,
conscious efforts to restore confidence on the Naira, the future policy outlook
is promising. As noted by the World Bank, inflation is expected to ease in 2024
mainly due to alignments and adjustments to the shift in policies. However,
PwC cautioned that the marginal decline in inflation and 3.1% rise in GDP
may not be sufficient to achieve price stability without credible effort to
aligning fiscal and monetary policy required for sustainable growth.
My Conclusion
At the moment, the main task before us is foreign exchange stability as
appreciation in the value of Naira could lead to reduced inflation. This,
however, requires massive inflow of foreign exchange. Therefore, targeting
remittances and investments becomes imperative and urgent. Ironically,
significant Greenfield and Brownfield investments can hardly be attracted to
Nigeria under the present hostile business environment leaving the country at
the mercy of speculative portfolio investors with high appetite for hike in
rates. Therefore, a balancing act is required to attain consistency on the
Bank’s tightening stance needed to enhance investors’ confidence and, at
the same time, to be mindful on the increasing cost of doing business which is
threatening the country’s ability to produce and repay its financial
obligations.

Accordingly, I voted for tightening to rise rates mildly and reducing excess
liquidity as follows:
i.
MPR: +100 points to 19.75%
ii.
CRR: From 32.5% to 45%
iii.
AC: from +100/-300 basis points to +100/-700
iv.
LR: Retain 30%

Recommendations
Evidently, structural factors would continue to limit transmission of monetary
policy in Nigeria. To achieve a balanced approach, it may be wise for the
Bank to consider it worthy and strategic to initiate strategic partnerships to
develop effective framework for dealing with the major components of
inflation in Nigeria, namely food and energy. In specific terms, the Bank may
work with various MDAs and private sector in the following areas:
i.
Inflation: medium term strategy that targets inflation should be
validated and completed in earnest.
ii.
Agriculture: immediately commence the implementation of Federal
Government’s National Agricultural Technology and Innovation Policy
(NATIP)-2022-2027 to enhance food security, bring down food prices
and increase exportable commodities
iii.
Energy: the country should work with the private sector and foreign
investors to achieve energy security by 2030.
iv.
Industry: there should be a careful selection and development of high
potential export-oriented industries.
v.
Speculations: maintain strict supervision of all crypto operations and
banks.
vi.
Lending to Real Sector: there should be effective management of
concentration risks and re-design instruments for de-risking lending to
genuine Micro Small and Medium Enterprises.
vii.
Logistics: efficiency in the ports should be prioritized and addressed.

viii.
Prudence:
the
country
should
enhance
transparency
and
accountability in public finance.
ix.
Wealth and Jobs: youth and women employment and enterprise
development should be embedded in any public funded programme
and project nationwide.

10. MUSTAPHA AKINKUNMI
Context
The Nigerian economy grew consistently at about 3 percent annually in 2022
and 2023. Growth may slow modestly in 2024 as Nigeria sacrifices some
growth to contain inflation. A depreciation of the Naira will help Nigeria
competitiveness and stimulate non-oil exports. These adjustments are not
without pain as rising food prices reduce the purchasing power of low to
middle-income Nigerians.
The Fisher equation summarizes Nigeria's dilemma: to keep real interest rates
positive, the interest rate must be greater than the rate of inflation.
The rising cost of food and other necessities are eroding the purchasing
power of ordinary Nigerians. We must act immediately to bring Inflation
down. Timing is critical in applying all monetary tools to be effective in the
short to medium term.
I appreciate increasing the rate is a trade-off for growth. However, the
investment community needs strong commitment and confidence from the
CBN to bring FDI to Nigeria. An attractive yield is crucial at this moment
considering the growth we are experiencing in the OECD countries. In the
thought process of managing inflation at the expense of growth, we must
also notice the exchange rate pass-through to domestic prices. I align with
my colleagues to increase the MPR.
The Global Economy
The modest upgrade of global GDP growth projections by the IMF (2024) is
estimated at 3.1 percent in 2024, and 3.2 percent in 2025, due to resilience in
the United States and many large emerging markets and developing
economies (EMDEs) with fiscal support in China. This anticipated global
economic performance is premised on gradual inflation decline and steadily
rising growth.
While China and the UK have been identified as the biggest rebounders,
consumer confidence seems to be trending down across most developed
and emerging economies. However, the US Consumer Confidence Index
increased to 110.7 in December 2023, indicating more optimistic views of
personal income prospects, favourable business conditions, and job
opportunities. Despite robust recovery in Russia’s sales growth as well as in
China, Russia’s growth pace is likely to be dragged down due to its monetary
tightening, thus cooling household demand. Core inflation in advanced
economies, fell to 3.9 percent in December 2023 (against 4.0 percent in
November 2023), while Eurozone year-on-year headline inflation decreased
to 2.8 percent in January 2024 from 2.9 percent in December 2023 due to

winter. This rise was driven largely by energy prices as all other inflation
components moderated. The UK headline inflation rose in the midst of
unexpectedly unchanged core inflation at 5.1 percent. A similar story was
witnessed in some emerging economies. India’s headline inflation climbed to
5.7 percent in December 2023 from 5.6 percent in November 2023, while
Russia inflation remain unchanged at 7.4 percent in December 2023 and
January 2024. By contrast, China continued to battle deflation which stood at
-0.8 percent in January 2024. In the meantime, Brazil’s inflation dropped for
five consecutive months to a record 4.5 percent in January 2024 from 5.2 in
September 2023.
Global commodity prices maintained their post-financial crisis level. Energy
prices maintained high levels after peaking in 2022, while metal prices
remained stable after a period of high inflation in 2022. The trend in food
prices was similar to the 2011 period of inflation. Thus, inflation is expected to
be stable between 2 percent and 2.3 percent for both the medium and long
term. Interest rates remained stable, especially in developed economies and
India. Brazil set the Selic annual rate at 11.8 percent in January 2024, the
same as December 2023 in order to mitigate weather-related disruptions to
staple crops such as rice and potatoes, with further reduction expectations.
The US real GDP growth surpassed the expectation by recording 3.2 percent
year over year in the fourth quarter of 2023. This outpaced economic
performance in Europe, pushed down by the Eurozone's third-quarter 2023
contraction (-0.1 percent). The UK real GDP reduced by 0.2 percent over the
three months to November 2023,compared with the three months to August.
China’s economy recorded a robust growth of 5.2 percent in 2023 to reach
US$17.7 trillion, with consumption accounting for over 80 percent. India’s
growth target of 7 percent is anticipated in 2024-25, as Russia’s wartime
economy is expected a rebound to witness a growth rate of about 2.7
percent to 3 percent in 2024. This economic performance is most likely driven
by resilient domestic demand, robust government spending, and wage
growth.

Domestic Context

The challenge of persistently increasing inflation remains a significant concern
in Nigeria, with the country's headline inflation rising to a near 28-year high of
29.9 percent in January 2024, up from 28.9 percent in December 2023. Of
particular note, food inflation, which comprises a substantial portion of the
inflation basket, rose to 35.4 percent from 33.9 percent in December 2023.
This increase is largely driven by higher prices of essential food items including
bread, fish, meat, fruits, and eggs. Month-on-month inflation also climbed to

3.2 percent from 2.7 percent in December 2023, primarily due to increased
transportation costs and panic buying resulting from uncertain commodity
prices stemming from exchange rate fluctuations. Additionally, core inflation
increased to 2.2 percent from 1.8 percent, largely due to the elevated cost of
imported goods associated with the high exchange rate. The decline in the
labor participation rate has contributed to an increase in the unemployment
rate, which rose to 5 percent in Q3 2023 from 4.2 percent in Q2 2023. Notably,
the informal sector remains the largest employer in Nigeria, accounting for
92.3 percent of total employment. Despite this, a significant proportion of
employed individuals are engaged in self-employment, comprising 87.3
percent of the workforce in Q3 2023.
Furthermore, Nigeria witnessed a decrease in its reserve money to
approximately N24.2 trillion by the end of January 2024, while broad money
(M3) supply increased to N93.7 trillion. This exacerbates inflationary pressures
within the country.
Additionally, Nigeria's external reserves increased to US$34.54 billion in
February 2024 from US$32.23 billion in January 2024. The current reserves
could finance 6.9 months of imports of goods and services. The reserves-tobroad money ratio of 40.6 percent surpasses the 20.0 percent threshold,
strengthening the country's capacity to manage capital flows.
In terms of balance of payments, Nigeria reduced its overall deficit to US$0.28
billion in Q3 2023 from US$1.34 billion in Q2 2023, primarily due to a decline in
merchandise imports. Furthermore, the current account recorded a higher
surplus of US$3.28 billion compared to US$0.81 billion in Q2 2023, driven by
favorable export developments. However, net financial liabilities increased to
US$3.74 billion from US$1.25 billion in Q2 2023, mainly due to a significant rise in
portfolio investment inflows. Despite these positive trends, global economic
challenges, particularly in developed economies, led to a decline in diaspora
remittances to US$4.58 billion in Q3 2023, reflecting a decrease of 7.4
percent.

Decision
I am in favour of increasing all parameters. In my view, managing inflation is
paramount among macro variables. I am deeply committed to this cause. I
propose increasing the MPR by 400 basis points to tame inflationary pressure.
Additionally, I believe it's crucial to enhance our yield to attract FDI.
Moreover, I believe that banks remain awashed with liquidity and so I
advocate for increasing the Cash Reserve Ratio (CRR) to 50 percent.
Furthermore, I suggest making the Asymmetric Corridor more effective by

adjusting the floor to -600 basis points and the ceiling at +100 basis points.
However, I concur with my colleagues in maintaining liquidity at 30 percent.

11. PHILIP IKEAZOR

In view of the prevailing challenges occasioned by excess money supply,
exchange rate depreciation, and the resultant heightened inflation that
poses a threat to macroeconomic stability, I voted to:
i.
Raise the MPR by 300 basis points to 21.75 per cent from 18.75 per cent.
ii.
Adjust the asymmetric corridor around the MPR to +100/-700 from
+100/-300 basis points.
iii.
Raise the Cash Reserve Ratio from 32.50 to 45.00 per cent.
iv.
Retain Liquidity Ratio at 30.00 per cent.

Summary of key Global and Domestic Developments
Global inflation is expected to decelerate at a faster pace in 2024, on
account of tight monetary policies, slack in labour markets, and pass-through
effects of declining energy prices. The International Monetary Fund (IMF)
projects global inflation to decline to 5.8 per cent in 2024 from 6.8 per cent in
2023. Whereas, emerging and developing economies continue to grapple
with still elevated price levels due to peculiar structural and pass-through
factors, inflation in the advanced economy have trended downward, albeit
slowly, as a result of aggressive tightening of the policy environment in 2023.
The IMF projects the global economy to grow at a 3.1 per cent in 2024, driven
largely by stronger than expected resilience in advanced economies.
Decelerating inflation and easing of policy interest rates in advanced
economies, signaling an end to monetary tightening, could be an impetus to
growth in the advanced economies in 2024. Growth in Emerging Markets
and Developing Economies is expected to remain at 4.1 per cent in 2024, the
same as in 2023.
Despite the positive outlook, the global economy continues to face
downside risks, including geo-economic fragmentation and rising geopolitical tensions like ongoing Russia-Ukraine and Israel-Gaza war and China
property crisis, among others, all of which have constituted a drag on global
growth. This has created uncertainty on the paths for policy rates by major
central banks, especially in the emerging and developing economies.
In the domestic economy, real GDP grew by 3.46 per cent in Q4 2023
compared with 2.54 per cent in Q3 2023. Growth in Q4 2023 reflected
expansion in Services sector by 3.98 per cent, Agriculture sector by 2.10 per
cent and the oil sector by 12.11 per cent, on account of higher crude
production. The composite Purchasing Managers Index (PMI) remained

below the threshold at 48.5 index points in January 2024, compared with 49.1
index points, showing a decline in economic activity. Industry PMI, however
rose to 50.4 index point which is above the threshold in January 2024, due to
expansion in employment and production levels, Agriculture PMI also
expanded in January 2024, after four months of contraction, reflecting
improvement in farm yield, new orders, inventory, and general farming
activities.
Headline inflation (year-on-year) increased further to 29.90 per cent in
January 2024 from 28.92 per cent in December 2023, driven largely by the
increase in both food and core inflation. The current persistent inflationary
pressures reflect the effects of a combination factors including rising food
and energy prices, exchange rate pass-through, high growth in money
supply, underscored by significant growth and level of Currency Outside
Depository Corporations (CODCs).
The performance of the external sector remained subdued by the effects of
uncertainties in the global economy, amid tight financial conditions thereby
contributing to the current exchange rate pressures. The overall balance of
payments deficit narrowed to US$0.28 billion (0.4 per cent of GDP) in Q3
2023, relative to US$I .34 billion in Q2 2023, due to moderation in the
drawdown of external reserves to finance the balance of payments
obligations.
The banking system continues to be resilient as the industry financial
soundness indicators (FSls) like the capital adequacy ratio (CAR) and nonperforming loan (NPL) ratio are still within the regulatory threshold and the
recapitalization of banks is imminent, to preserve the stability of the financial
system, which is a key priority on its own, and for effective transmission of
monetary policy.
My Considerations
The economy is currently witnessing accelerating inflation, sluggish output
growth, and a depreciated exchange rate. A tight monetary policy stance
at this period therefore seems to be the most viable option to moderate
inflation and mitigate exchange rate passthrough that has eroded
households' purchasing power in recent past. The challenges inform a
hawkish monetary policy, whitst still been mindful of the effect of higher
interest rates on loans for borrowers, especially in the real sector of the
economy. Undue hikes could, therefore, worsen costs of borrowing, curtail
lending and hurt economic growth without moderating inflation to a level

sufficient to achieve the desired outcome.
The need for a trade-off between inflation and growth constitutes a binding
constraint on the policy decision. In the present circumstance, price stability
must take priority over economic growth to preserve the primary goal of
monetary policy and prevent progression to hyperinflation at which point
monetary policy becomes ineffective. Of course, consideration must be
given to what is optimal for growth without sacrificing price stability.
In terms of the choice of policy instruments, the current inflation is apparently
not credit related but largely fueled by excess liquidity in the system as
indicated by the significant growth of monetary phenomenon. Deploying
MPR only without complementary tools might not achieve the desired result
of moderating inflation. Complementary tools like the Cash Reserve Ratio
(CRR) and the asymmetric corridor have direct impact on liquidity, thereby
potent in taming inflation if applied consistently over required periods.
Considering our unique circumstance where personal credit constitutes only
5.21 per cent of the banking industry total lending at end-January 2024, the
CRR and the asymmetric corridor would be a most potent tools to moderate
excess liquidity.
Significant increases in rates are required to signal the intention to address
the current negative real interest rate that is a disincentive to foreign
investment. Raising the rates wili encourage capital inflow to boost foreign
exchange supply and strengthen the naira.
Ultimately, as an import-dependent economy the exchange rate channel of
monetary policy transmission is now more active than ever and requires close
attention. Notably, the pressure on exchange rate is gradually dissipating
due to various reforms in the foreign exchange market by the Central Bank
of Nigeria. This includes unification of exchange rate, review of the
operational guidelines for International Money Transfer Organization (IMTO)
and Bureau De Change (BDC) reforms.
The concerted effort between the monetary and fiscal authorities in driving
national economic goals is critical to navigating current economic
challenges and delivering significant expected results. Measures such as
various agricultural and CNG initiatives by the fiscal authorities are expected
to help manage food inflation, moderate energy prices and transportation
cost, thereby ameliorating the high cost of living. It is crucial that export
operations and policies are streamlined to boost non-oil exports and improve
foreign exchange liquidity to support price stability.

In conclusion, a tight monetary policy stance would be effective in curbing
excess liquidity and significantly elevated price levels. Fiscal policies and
reforms should be formulated to make our economy more productive and
assist to gradually moderate high public debt.

12. OLAYEMI CARDOSO
Governor of the Central Bank of Nigeria and Chairman, Monetary Policy
Committee
I wish to acknowledge the significance of presiding over the inaugural
Monetary Policy Committee (MPC) Meeting as the Governor of the Central
Bank of Nigeria (CBN) amidst a backdrop of profound economic challenges:
escalating
inflationary
pressures,
sluggish
economic
growth,
volatile
exchange rates of the naira, and a rising cost of living. The anticipation
among Nigerians for this meeting to deliver viable solutions that will steer the
economy towards sustainable growth and position Nigeria as an attractive
investment destination is palpable.

On a global scale, economic growth remains subdued while inflation,
persistently exceeding the targets of most central banks, exhibits a gradual
decline. Geopolitical conflicts continue to disrupt global supply chains,
contributing
to
escalating
debts
reaching
unprecedented
levels.
Domestically, Nigeria witnessed a surge in inflation to 29.9 percent in January
2024, up from 28.9 percent in December 2023. Despite the resilience of weak
economic growth, the depreciation of the naira against major currencies,
driven by a persistent shortage of foreign currency liquidity, has led to price
pass-through effects. Notably, the equities market has shown promising
performance in 2024.

The post-COVID-19 fiscal support and subsequent deficit financing have
created a lax financial environment, culminating in surplus liquidity within the
banking system. This surplus liquidity has not only directly fueled inflation but
also intensified pressure on the foreign exchange market due to heightened
demand for foreign currency as an alternative store of value. The fiscal
authorities have exhibited commitment to fiscal prudence by reducing the
fiscal deficit and emphasizing revenue generation in the 2024 Appropriation
Act. Given staff projections of sustained inflationary pressures in the short
term, it is imperative to deploy monetary policy tools to mitigate these
pressures and foster price stability.

Moreover, adopting a tighter monetary stance will steer us towards achieving
positive real interest rates, a crucial goal to stimulate savings and investment
within the domestic economy. This strategic move also holds the potential to
attract the capital inflows necessary to enhance liquidity in the foreign
exchange market and bolster the currency in the immediate term.

Recognizing that the current inflationary pressures are multifaceted and not
solely monetary in nature, particularly exacerbated by the surge in food
prices due to various factors, including low productivity, insecurity, and
elevated energy costs post fuel subsidy removal, underscores the necessity
for a comprehensive approach beyond monetary policy. Addressing these
structural challenges calls for a holistic response involving non-monetary
stakeholders to implement appropriate actions.

The price stability mandate vested in the Central Bank necessitates making
difficult decisions to steer the economy towards recovery. After carefully
weighing the costs against the risks confronting the economy, I firmly
advocate for an assertive tightening approach to counter the prevailing
inflationary pressures. While cognizant of the potential drawbacks of a
contractionary monetary policy stance, such as impacting output growth
and lending rates, constraining credit availability and affordability to smallscale businesses and consumers, as well as affecting government borrowing
costs and liquidity management, I believe these short-term sacrifices are
crucial in our pursuit of achieving price stability and sustained economic
growth.

Given the imperative to curb inflationary pressures, which could pose social
challenges and impede long-term growth prospects, I am persuaded that
the MPC must adopt an assertive stance by tightening monetary policy
measures, with a medium-term inflation target of 21.40% by the end of 2024
in mind. Therefore, I cast my vote in favor of increasing the Monetary Policy
Rate (MPR) by 425 basis points to 23.0 percent, raising the Cash Reserve
Ratio (CRR) by 1250 basis points to 45.0 percent, and adjusting the
asymmetric corridor to +100 and -500 basis points around the MPR.
OLAYEMI CARDOSO
Governor
February 2024